As CEO Turnover Rises, Outsiders Are Given a Closer Look

The Hunt Scanlon article, "As CEO Turnover Rises, Outsiders Are Given a Closer Look," quoted Russell Reynolds Associates' CEO
Clarke Murphyabout boards being more committed to long term succession planning. The article is excerpted below.

May 5, 2016 - Last year, 17 percent of the largest 2,500 public companies in the world changed their CEO, more than in any of the previous 16 years of the ‘CEO Success Study‘ from Strategy&, PwC’s strategy consulting business.

The report found that over the past several years more big companies have been deliberately choosing their new CEO from outside of the company as part of a planned succession, an indication that hiring an outsider has become more of an intentional leadership choice than a necessity.

Outsiders accounted for 22 percent of all CEOs brought in via a planned succession between 2012 and 2015, up from 14 percent in the 2004 to 2007 period. In addition, almost three quarters of all outsider CEOs were brought in during planned successions during that same period, up from 43 percent in 2004 through 2007.

However, the majority of companies have continued to promote insiders to the CEO position and the study authors think this will remain the preferred succession planning practice (77 percent insiders vs. 23 percent outsiders in 2015). Outsider CEOs have caught up and closed a performance gap that the study previously found between outsider and insider CEOs, possibly strengthening the case for considering a new leader from outside the company.

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Clarke Murphy, CEO of Russell Reynolds Associates, agreed: “Since the financial crisis,” he said, “boards are more committed than ever to long term succession planning and rigorous processes to find and select the best executive to succeed incumbent CEOs.” He said their efforts “reflect a deliberate process” that is now resulting in superior leaders being put into position.